If you talk to shop owners that are selling personalized products, one thing you'll hear from them is confusion over how to price their personalized products. There are not many best practices. Most shop owners just set their pricing without having sound reasoning behind their choices. I've talked to many of these shop owners and here's what I've learned.
Pricing personalization is more art than science as the are number of factors to consider.
When thinking about how price your personalization, its good to establish the boundaries of the pricing to consider. The lowest price for your personalization should cover the cost of the personalization effort. Most of that cost will come from the labor to do the personalization work.
To determine the maximum that can be charged, one must look at the value of the personalization to the consumer. While value can be hard to determine, you can get a feel for it by asking potential customers questions like, 'What is the most that you spend to get this customized?' or 'Would you spend $_____ to get this personalized?'
In general, consumers put a lot of value on personalized gifts and on products that reflect their own personal brand.
There are a number of factors to consider when determining the value of personalization including:
The table below shows the actual pricing from webstores that are offering personalized products. The stores and products are a random sampling. The right most column, labelled %, is the percentage increase in the base price for the personalization.
As you can see, the price of personalization as a percentage of the base price varies widely from 10% to 163%. The average is 44% and the mean is 30%.
So a good starting benchmark for price increase would be 1/3. Then you should adjust the price up or down as needed.
Once you determine the initial price that you want to charge for your personalzation, you need to test it to optimize the price. Try moving the price up and down and see what impact that has on conversion for the product and conversion for personalization. If you increase price and conversions stays flat, you can try increasing the price again.
Also test having the personalization being the default setting. In general, setting personalization on by default improves the personalization conversion with no impact on the product's overall conversion.
Start by pricing personalization as a 1/3 mark-up on the product's base price. Then test the personalization by first moving it up and measuring the impact on conversion. The goal is price personalization at the value that consumers see for it.
ProductGraph makes some of the best software available to for product customization in your online store. If you are selling personalized products, we can help.